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There is an increasing use of plastic money in the economy, which has made it easier for individuals to apply for a loan. Applying for a personal loan is a simple and hassle-free procedure, which is approved in a couple of days. A loan on a credit card is similar to a personal loan.

What is a loan against a credit card?

A credit card is issued by the bank, which allows you to borrow money for your immediate use and pay the same amount gradually in the future. Every card has a credit limit and if your requirement of cash is higher than the withdrawal limit, you may apply for a loan on the card.

Such a loan has an instant approval process. It is the quickest option to raise finance and is a type of unsecured loan. In addition, it does not require any documentation because the banks already collect your documents, including an address proof, an identity proof, and an income proof, when you apply for a card.

The loan may be repaid in monthly installments and it usually carries a maximum tenure of 24 months. The two important factors that make you eligible for a loan against a credit card are as follows:

1. It is important to have a credit card account in order to avail of the loan. (Certain banks offer loans to existing customers only, while a few banks offer loans to new customers as well.)

2. Once you have started using the card of a particular bank, ensure you maintain a high credit score.

When do you need a loan against your credit card?

A loan against the card is ideal in times of emergency when you require immediate access to funds. The banks will provide a loan against your card and charge a lower rate of interest than the interest charged on cash withdrawals. When you apply for a loan, the withdrawal limit will not exceed. It will remain the same, but you will avail of funds against your card. Banks usually transfer the amount directly to your account.

One important thing to note is that it is important to repay the loan and its interest amount within the due date in order to maintain a strong credit history. Also, a loan on your card should not be your only go-to option every time you require additional funds. Consider it as a last resort in case of an emergency, when you need instant funds in your account.